Hundreds of schools held hostage over PFI contracts, as investigation reveals one paid £2,000 for a new sink

Hundreds of schools across England are being held hostage to PFI contracts, with some paying up to £8,000 for items such as window blinds due to the crippling rates charged.

With schools facing their first real-terms funding cut since the 1970s, many are considering cutting back on staff, as one school revealed it had been paying £88 annually for 14 years for the installation of a new sink.

Introduced in 1997, PFI contracts were used by Tony Blair’s Labour government to finance the construction and refurbishment of more than 500 schools, with the Coalition announcing plans to rebuild an additional 100-300 in 2011.

Seen as a way to increase public sector funding without increasing taxes, PFI schools are paid for by private companies, who then lease the buildings back to the Government over a period of up to 40 years.

Maintenance costs and interest are also added to the rates paid back.

Former Prime Minister Tony Blair and his successor Gordon Brown pictured on a school bus in 2007

But an investigation has now laid bare the spiralling costs that PFI schools are facing, with some paying thousands of pounds to their leaseholders to refit small utilities and furniture that would otherwise cost a fraction of the rates charged.

The fees, termed “life-cycle costs”, mean that schools are charged over the duration of the contract - resulting in modest monthly payments spiralling out of control.

A survey by TES has revealed that one school now pays £132,478 to its PFI company annually, while Bristol Metropolitan Academy will pay £8,154 for the fitting of a single blind in one of its rooms.

Oasis Academy Brislington, a few miles down the road, faces a total bill of £2,211 for an external water tap, which normally costs £78-80, according to comparison websites.

Meanwhile, at Newham RC College in Oldham, the school was charged £48 for security staff to open gates allowing children access to the lavatory. It also paid more than £400 for caretakers to fit a number of notice boards around the school.

Jenny Smith, headteacher of the Frederick Bremer Secondary School in Walthamstow, London, said that if the issue of PFI charges was not addressed it could threaten a funding crisis at the school.

“Out PFI costs are already prohibitively high at about 16.7 per cent of our budget. These are fixed costs and cannot be reduced,” she added.

“Over the next three years we are facing real-term cuts to our budget of over £800,000, and that does not include PFI increases. Obviously, this is completely unviable for the future of the school.”

The growing crisis had forced the National Audit Office to intervene, with the government watchdog now investigating whether PFI contracts provide any benefit to schools.

MPs have also demanded that the Government steps in to resolve the issue, among fears that the added burden of PFI repayments could stretch school budgets to breaking point.

Meg Hillier, chair of the Public Accounts Select Committee, said that some schools with PFI contracts were being hit with a “triple whammy”, adding that the Department for Education had failed to get a “grip” on the situation.

“The government has not fully understood the interaction of existing PFI deals that people are tied into and the demands that [ministers] are making for £3 billion in efficiency savings,” she said.

“This is just another example of the lack of grip by the Department for Education on the reality for schools on the ground who are trying to sort out their budgets.”

A Department for Education spokesperson said that the new national funding formula will be provide a “fairer” distribution of resources to schools across the country, and that PFI costs would be taken into account.